ADIT, Dehradun V. M/s. Sundowner Offshore Intl Burmuda Ltd., Dehradun

ITA 4444/DEL/2011

• Counselvise Citation: 444420114 RSA 2011
• Duration Of Justice: 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2008-2009
• Appeal Filed On: 04-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K CHAND
• Section: 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI G BENC H BEFORE SHRI RAJPAL YADAV, JM & SHRI A.N. PAHUJA, AM ITA NO.4444 & 4445/D/2011 ASSESSMENT YEAR:2008-09 ASSISTANT DIRECTOR OF INCOME-TAX, INTERNATIONAL TAXATION,13A,SUBHASH ROAD, AAYAKAR BHAWAN, DEHRADUN V/S . M/S SUNDOWNER OFFSHORE INTERNATIONAL BURMUDA LTD. AS AGENT OF (I)MR. MARK PANKHURST;AND (II) MR. RALPH VISSER, C/O NANGIA & CO., 75/7, RAJPUR ROAD, DEHRADUN [PAN:AAHCS 0550 M] (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI AMIT ARORA, CA REVENUE BY SHRI N.K. CHAND, DR DATE OF HEARING 07-12-2011 DATE OF PRONOUNCEMENT 07-12-2011 O R D E R A.N.PAHUJA:- THESE TWO APPEALS FILED ON 4 TH OCTOBER, 2011 BY THE REVENUE AGAINST TWO SEPARATE ORDERS DATED 21-07-2011 OF THE LD. CIT(A)-II, DEHRADUN, RAISE THE FOLLOWING SIMILAR GROUNDS:- 1. ON FACTS AND CIRCUMSTANCES OF THE CASE, WHETHER IN THE CASE OF EMPLOYEE RECEIVING A TAX-FREE SALARY, AS PER AGREEMENT, THE TAXES PAID BY EMPLOYER CONSTITUTED A MONETARY THAT WAS PART AND PARCEL OF SALARY. 2. ON FACTS AND CIRCUMSTANCES OF THE CASE, WHETHER THE LEARNED CIT(A) HAS ERRED IN ALLOWING EXEMPTION U/S 10(10CC) , WHERE THE FACTS CLEARLY ESTABLISH THAT THE TAX PAID BY TH E COMPANY M/S TRANSOCEAN OFFSHORE DEEPWATER DRILLING INC. FOR ASSESSMENT YEAR 2008-09 WAS PART AND PARCEL SALARY OF MR. MARK PANKHURST & MR. RALPH VISSER, AGENT AND THEREFORE, THIS PAYMENT ON BEHALF OF THE ASSESSEE CONSTITUTED A MONETARY PAYMENT FALLING OUTSIDE THE PURVIEW OF SEC TION 10(10CC) OF THE INCOME-TAX ACT. ITA NO.4444 & 4445/D/2011 2 3. ON FACTS AND CIRCUMSTANCES OF THE CASE, WHETHER IN THE LEARNED CIT(A) HAS ERRED IN FOLLOW THE DECISION OF SPECIAL BENCH OF ITAT, WHICH IS PERVERSE AND DISREGARDED TH E CLEAR CUT PROVISIONS OF SECTION 17(2) READ WITH SECTION 1 0(10CC) AND CORROBORATED BY SECTION 195A R.W.S. 198 OF THE INCOME- TAX ACT, 1961 AND AGAINST WHICH DEPARTMENT IS IN AP PEAL BEFORE THE HONBLE HIGH COURT OF UTTRAKHAND. 4. THE APPELLANT PRAYS FOR LEAVE TO ADD, AMEND, MOD IFY OR ALTER ANY GROUNDS OF APPEAL AT THE TIME OF BEFORE THE HEA RING OF THE APPEAL. 2. FACTS, IN BRIEF, AS PER RELEVANT ORDERS ARE THAT THESE ASSESSEES VIZ. MR. MARK PANKHURST AND MR. RALPH VISSER EMPLOYEES OF M/ S SUNDOWNER OFFSHORE INTERNATIONAL BURMUDA LTD., FILED RESPECTIVE RETURN S DECLARING INCOME OF ` `76,93,900/- 11.09.2008 AND ` `79,10,114/- ON 21.07.2008 ..AFTER BEING PROCESSED U/S 143(1) OF THE INCOME-TAX ACT, 1961 (H EREINAFTER REFERRED TO AS THE ACT), THESE RETURNS WERE SELECTED FOR SCRUTINY, WIT H THE SERVICE OF A NOTICE DATED 26 TH FEBRUARY, 2009 U/S 143(2) OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER (A.O. IN SHORT) NOTICED THAT THESE ASSESSEES CLAIMED EXEMPTION U/S 10(10CC) OF THE ACT IN RESPEC T OF TAX PAID BY THE EMPLOYER ON THEIR SALARY. HOWEVER, THE AO WAS OF THE OPINIO N THAT TAX PERQUISITE U/S 17(2)(IV) WAS NOT ENTITLED FOR EXEMPTION U/S 10(10C C) OF THE ACT. THOUGH, THE AO REFERRED TO DECISION OF SPECIAL BENCH IN THE CASE O F RBF RIG CORPORATION LLC, AGENT OF ITS VARIOUS EMPLOYEES VS. ACIT (2007), 11 3 TTJ 143, HE DID NOT FOLLOW THE DECISION ON THE GROUND THAT TAX PERQUISITE WAS A MONETARY PAYMENT. 3. ON APPEAL, THE LD. CIT(A), FOLLOWING THE AFORESA ID DECISION IN RBF RIG CORPN. LLC (SUPRA) ALLOWED THE CLAIM OF THESE ASSES SEES IN THE FOLLOWING TERMS:- 4. GROUND NOS. 2 TO 4 PERTAIN TO A SINGLE ISSUE O N ACCOUNT OF ADDING THE TAXES PAID BY THE EMPLOYER ON BEHALF OF THE EMPLOYEE TO THE GROSS TOTAL INCOME OF THE ASSESSEE AND THEREAFT ER APPLYING THE RELEVANT TAX RATE ON THIS GROSSED UP AMOUNT. IT IS SEEN THAT THIS ISSUE IS SQUARELY COVERED BY THE DECISION OF THE IT AT, SPECIAL BENCH, NEW DELHI IN THE CASE OF RBF RIG CORPORATION LLC VS. ACIT (109 ITD 141). THE HEAD NOTE OF THIS CASE MAY BE REPRODUCED AS UNDER:- ITA NO.4444 & 4445/D/2011 3 SECTION 10(10CC) OF THE INCOME-TAX ACT, 1961 PER QUISITE, NOT PROVIDED BY MONETARY PAYMENT ASSESSMENT YEAR 2004 -05 WHETHER PAYMENT OF TAX ON BEHALF OF EMPLOYEE AT OPT ION OF EMPLOYER IS A NON-MONETARY PERQUISITE FULLY COVERED BY SUB-CLAUSE (IV) OF CLAUSE (2) OF SECTION 17 AND, THUS, EXEMPT UNDER SECTION 10(10CC) AND IS NOT LIABLE TO BE INCLUDED IN TOTAL INCOME OF EMPLOYEE HELD, YES WHETHER TAXES PAID BY EMPLOY ER CAN BE ADDED ONLY ONCE IN SALARY OF EMPLOYEE AND THEREAFTE R, TAX ON SUCH PERQUISITE IS NOT TO BE ADDED AGAIN HELD, YES. 4.1 IT IS SEEN THAT IN THE BODY OF THE ASSESSMENT O RDER, THE LEARNED ASSESSING OFFICER HAS REFERRED TO THE ABOVE MENTIONED SPECIAL BENCH DECISION BUT TENDED TO INTE RPRET THE SAME TO IMPLY THAT SUCH PAYMENT OF TAXES BY THE EMPLOYER ON BEHALF OF THE EMPLOYEE, IS NOT COVERED U/S 10(10CC) OF THE ACT. TILL SUCH TIME THAT A HIGH CO URT OVERRULES THIS DECISION OF THE SPECIAL BENCH OF THE ITAT, THIS DECISION IS BINDING ON SUBORDINATE JUDICIAL AU THORITIES. ACCORDINGLY, THE INTERPRETATION PUT FORTH BY THE LE ARNED ASSESSING OFFICER CANNOT BE ACCEPTED AND THE APPELL ANTS CONTENTION HAS TO BE UPHELD. THUS, THE APPELLANT DESERVES TO SUCCEED IN RESPECT OF GROUND NOS. 2 TO 4. 4 THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST TH E AFORESAID FINDINGS OF THE LD. CIT(A). AT THE OUTSET, THE LEARNED DR POIN TED OUT THAT THE LEARNED CIT(A) ALLOWED THE RELIEF FOLLOWING THE DECISION OF SPECIA L BENCH TRIBUNAL IN THE CASE OF RBF RIG CORPN. LLC (SUPRA).ON THE OTHER HAND, LEARN ED AR ON BEHALF OF THESE ASSESSEES SUPPORTED THE FINDINGS OF LEARNED CIT(A). 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE FACTS OF THE CASE AS ALSO THE AFORESAID DECISION OF THE ITAT IN RBF RIG CORPORATION LLC(SUPRA) WHERE IN IT WAS HELD AS UNDER: 16. IT IS CLEAR FROM ABOVE THAT TAXES PAID BY EMPL OYER ON BEHALF OF THE EMPLOYEE WERE TREATED AS A PERQUISITE COVERE D BY SUB- CLAUSE (IV) OF CLAUSE (2) OF SECTION 17 OF THE INCO ME-TAX ACT AND, THEREFORE, INCLUDIBLE IN THE SALARY. THERE IS NO D ISPUTE THAT PAYMENT OF TAXES MADE BY THE EMPLOYER ON BEHALF OF THE EMPLOYEE IS A PERQUISITE AND PART OF THE INCOME ASS ESSABLE UNDER THE HEAD SALARY IF CLAUSE 10(10CC) WAS NOT BROUGHT ON THE STATUTE BOOK. IT IS ALSO A BENEFIT OR AMENITY ENJOYED BY THE ITA NO.4444 & 4445/D/2011 4 EMPLOYEE BUT IT IS NOT A MONETARY PAYMENT TO THE EM PLOYEE. IT IS A PAYMENT BY THE EMPLOYER WHICH DISCHARGES AN OB LIGATION OF THE EMPLOYEE, WHICH OTHERWISE WOULD HAVE BEEN DISCH ARGED BY THE EMPLOYEE. SUCH PAYMENTS OF TAXES, THEREFORE, A RE FULLY COVERED BY ABOVE SUB CLAUSE (IV). 17. THE DECISION OF CIT VS. AMERICA COUNTING CORPOR ATION 123 ITR 513, NOTED ABOVE ALSO SUPPORTS THE VIEW THAT TA XES PAID ON BEHALF OF THE ASSESSEE IS A PERQUISITE OR A BENEFIT , BUT NOT INCOME FROM BUSINESS. IT COULD NOT BE TAXED EXCEPT UNDER CLAUSE (IV) OF SECTION 28 WHICH PROVIDED THAT A BEN EFIT OR PERQUISITE WAS LIABLE TO BE CHARGED TO TAX. 17.1 IT IS NOT MONEY, WHICH IS PAID TO THE ASSESSEE WHEN TAXES ARE PAID ON HIS BEHALF, IT IS DISCHARGE OF HIS OBLI GATION. THE PAYMENT FULLY FITS IN THE JACKET OF SUB-CLAUSE (IV) OF SECTION 17(2) OF THE ACT, IT MAY BE A MONETARY GAIN OR MONETARY B ENEFIT OR A MONETARY ALLOWANCE BUT DEFINITELY IT IS NOT A MONET ARY PAYMENT TO THE ASSESSEE. WHAT IS EXCLUDED IN THE CLAUSE IS THE PERQUISITE IN THE SHAPE OF A MONETARY PAYMENT TO TH E ASSESSEE. IF IT IS A PAYMENT TO A THIRD PERSON LIKE PAYMENT O F TAXES TO THE GOVERNMENT, THEN SUCH PAYMENT OF TAXES CANNOT BE EX CLUDED UNDER CLAUSE 10(10CC). THE CIRCULAR OF THE BOARD A ND PROVISION OF SUB-SECTION (1A) OF SECTION 192, SECTION 40(A)(V ), 195A FULLY SUPPORT THE CLAIM OF THE ASSESSEE. WE, THEREFORE, HOLD THAT THE TAXES PAID BY THE EMPLOYER ON BEHALF OF THE EMPLOYE E IS A PERQUISITE WITHIN THE MEANING OF SECTION 17(2) OF T HE INCOME-TAX ACT, WHICH IS NOT PROVIDED BY WAY OF MONETARY PAYME NT. THEREFORE, THERE IS NO REASON NOT TO EXCLUDE SUCH P AYMENT OF TAXES FROM THE TOTAL INCOME OF THE ASSESSEE. IN OT HER WORDS, TAXES PAID BY THE EMPLOYER CAN BE ADDED ONLY ONCE I N THE SALARY OF THE EMPLOYEE. THEREAFTER, TAX ON SUCH PER QUISITE IS NOT TO BE ADDED AGAIN. WE, THEREFORE, FIND SUBSTANCE I N THE CONTENTION ADVANCED ON BEHALF OF THE LEARNED COUNSE L FOR THE ASSESSEE AND /THE INTERVENERS. THE QUESTION REFERR ED TO US IS ANSWERED IN FAVOUR OF THE ASSESSEE. THE APPEALS OF THE ASSESSES AND INTERVENERS ARE ALLOWED ON THIS ISSU E. 5.1 SINCE THE LD. CIT(A) MERELY FOLLOWING THE AF ORESAID DECISION OF THE SPECIAL BENCH WHILE THE LD. DR DID NOT BRING TO OUR NOTICE ANY CONTRARY DECISION NOR ANY OTHER MATERIAL SO AS TO ENABLE US TO TAKE A DIFFERE NT VIEW IN THE MATTER, WE ARE NOT INCLINED TO INTERFERE. IN VIEW THEREOF, GROUND NOS . 1 TO 3 IN THESE TWO APPEALS ARE DISMISSED. ITA NO.4444 & 4445/D/2011 5 6. NO ADDITIONAL GROUND HAVING BEEN RAISED BEFORE U S IN TERMS OF RESIDUARY GROUND NO.4 IN THESE TWO APPEALS, ACCORDINGLY, THI S GROUND IS ALSO DISMISSED. 7. IN RESULT, BOTH THESE APPEALS ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT SD/- SD/- ( RAJPAL YADAV ) (A.N. PAHUJA) JUDICIAL MEMBER ACCOUNTANT MEMBER COPY OF THE ORDER FORWARDED TO :- 1. M/S SUNDOWNER OFFSHORE INTERNATIONAL BURMUDA LTD. AS AGENT OF (I)MR. MARK PANKHURST;AND (II) MR. RALPH VISSER, C/ O NANGIA & CO., 75/7, RAJPUR ROAD, DEHRADUN 2. ASSISTANT DIRECTOR OF INCOME-TAX, INTERNATIONAL TAXATION, 13A, SUBHASH ROAD, AAYAKAR BHAWAN,DEHRADUN 3. CIT (APPEALS)-II, DEHRADUN 4. THE CIT CONCERNED. 5. THE DR, ITAT,G BENCH, NEW DELHI 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, DELHI